First Home Loan Deposit Scheme supporting 1/8th of all first home buyers

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on August 31, 2020
First Home Loan Deposit Scheme supporting 1/8th of all first home buyers

Photo by Becca Tapert on Unsplash

One-eighth of all first home buyers who purchased a home between March and June 2020 did so using the First Home Loan Deposit Scheme, a new report shows.

Roughly 12.5% of all homes purchased by first home buyers during the pandemic's peak months were done so utilising the scheme, according to the scheme's administrator the National Housing Finance and Investment Corporation (NHFIC).

The first home loan deposit scheme (FHLDS) was launched on January 1 2020 by the Federal Government to help first home buyers secure a home loan with a deposit as little as 5% while avoiding the high cost of Lenders Mortgage Insurance (LMI).

A new report by the NHFIC said the scheme has supported many younger buyers, but also some older cohorts. 

"The Scheme has had broad geographical reach supporting first home buyers across the country with strong interest from buyers in outer metropolitan and regional areas," the report said. 

"First time buyers have been able to bring forward their home purchases in line with the objectives of the Scheme. FHLDS has now cemented itself as part of the first home buyer support policy architecture."

The scheme may have helped increase first home buyers' share of the market, with CoreLogic's head of research Eliza Owen last week reporting first home buyers made up 29.5% of all owner-occupier commitments in June, far above the 23.2% decade average.    

"The expansion of the first home loan deposit scheme and other first home buyer incentives announced over June and July is likely to see a boost in first home buyer participation over the second half of 2020," Ms Owen said. 

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner-occupiers.

Lender

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
NSW/VIC/SA METRO & INNER REGIONAL AREAS
NSW/VIC/SA METRO & INNER REGIONAL AREAS

Variable Home Loan (Principal and Interest)

  • $5000 Cashback. T&Cs Apply.
Variable
More details
REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
More details
NO ONGOING FEESFREE REDRAW FACILITY
  • Rate Match Guarantee. Tic:Toc will match the rate on identical variable P&I home loans. T&C's Apply.
NO ONGOING FEESFREE REDRAW FACILITY

Live-in Variable Loan (Principal and Interest) (LVR < 90%)

  • Rate Match Guarantee. Tic:Toc will match the rate on identical variable P&I home loans. T&C's Apply.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of June 26, 2022. View disclaimer.

Deposit scheme saves applicants four years 

According to the NHFIC report, purchases made using the scheme enabled applicants to shave an average of four years (52 months) off their home purchase, mainly by avoiding a 20% deposit. 

Applicants in NSW saved nearly five years (57 months) and $65,221 in deposit savings, while applicants in the Northern Territory saved the least at 39 months (3.5 years), still a substantial amount of time. 

Average time buyers need to save the additional amount for a 20 per cent deposit

State

Additional amount required for 20% deposit

Time to save additional amount (months)

NSW

$65,221

57

VIC

$59,000

54

ACT

$60,875

54

WA

$45,000

48

SA

$44,625

48

TAS

$39,920

47

QLD

$49,000

45

NT

$46,700

39

AUS AVERAGE

$54,700

52

Source: ABS / NHFIC

Recipients also using other government support 

The report also found that two out of every five applicants who accessed the FHLDS also used other government incentives, such as the First Home
Owner Grant (FHOG) and the Commonwealth Government’s First Home Super Saver Scheme (FHSSS)

Of all FHLDS applicants, 14% received a FHOG from their state or territory, around 4% accessed the FHSSS, while as many as 40% also received stamp duty concessions. 

The scheme can also be used in conjunction with the new HomeBuilder scheme for those buying or building new properties. 

Building a home? The table below features construction home loans with some of the lowest variable interest rates on the market for owner-occupiers.

Lender

Variable
More details
GET A DISCOUNTED GREEN RATE
  • Interest Only during construction
  • No monthly, annual or ongoing fees
  • Get Australia’s lowest rate construction loan when you go green
GET A DISCOUNTED GREEN RATE

Green Construction Home Loan (Interest Only)

  • Interest Only during construction
  • No monthly, annual or ongoing fees
  • Get Australia’s lowest rate construction loan when you go green
Variable
More details
100% FULL OFFSET ACCOUNT
100% FULL OFFSET ACCOUNT

Offset Package Home Loan (Principal and Interest) (LVR < 60%)

    Variable
    More details
    BUNDLE YOUR HOME LOAN AND YOUR INVESTMENT LOAN FOR MORE SAVINGS
    BUNDLE YOUR HOME LOAN AND YOUR INVESTMENT LOAN FOR MORE SAVINGS

    Yard Investor Bundle Loan (Bundled with Home Loan)

      Variable
      More details
      AN EASY ONLINE APPLICATION
      AN EASY ONLINE APPLICATION

      Yard Investment Loan (Principal and Interest) (LVR < 80%)

        Variable
        More details
        100% FULL OFFSET ACCOUNT
        100% FULL OFFSET ACCOUNT

        Offset Package Home Loan (Principal and Interest) (LVR 60%-70%)

          Variable
          More details
          GREAT FLEXIBLE LOAN OPTIONS
          GREAT FLEXIBLE LOAN OPTIONS

          Basic Home Loan (Principal and Interest) (LVR 70%-80%)

            Variable
            More details
            FREE REDRAW FACILITY
            • Pay more to reduce the amount of interest you pay
            • Easily access additional funds in your redraw
            • Great rates and low fees
            FREE REDRAW FACILITY

            Basic Investment Loan (Principal and Interest) (LVR < 60%)

            • Pay more to reduce the amount of interest you pay
            • Easily access additional funds in your redraw
            • Great rates and low fees
            Variable
            More details
            • Pay more to reduce the amount of interest you pay
            • Easily access additional funds in your redraw
            • Great rates and low fees

            Yard Investment Loan (Principal and Interest) (LVR > 80%)

            • Pay more to reduce the amount of interest you pay
            • Easily access additional funds in your redraw
            • Great rates and low fees

            Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of June 26, 2022. View disclaimer.

            Who is applying using the scheme?

            The report also found that one in six (1,804) first home buyers accessing the scheme belong to key worker groups on the 'front lines' of the COVID-19 pandemic, such as teachers (37%), nurses (25%) defence personnel, firefighters and police (13%) and childcare workers (10%). 

            According to the report's data, half of all guarantees were issued to single applicants in moderate-income brackets – earning $60,000 to $80,000 - which is 52% below the maximum $125,000 per year income threshold, with a median property price of $370,000. 

            The other half was issued to couples earning between $90,000 and the maximum $125,000, with a median property price of $425,000. 

            The median applicants for both singles and couples were in the 25-34 age bracket, although 10% were over 40, and both bought 95% loan-to-value-ratio (LVR) homes in line with the scheme's design. 

            FHLDS1

            Where are applicants buying? 

            The FHLDS has supported first home buyers across all states and territories, mostly in line with residential population density: 62.3% of buyers purchased in major cities and 37.7% purchased in regional areas, compared to 32.3% of the population living regionally. 

            Scheme guarantees were mostly concentrated in NSW (2,263), followed by Queensland (1,845) and Victoria (1,617), and eight out of 10 loans guaranteed under the scheme were in these three states.

            Queensland actually had the highest number of FHLDS settlements as a proportion of total first home buyer purchases, while Western Australia and South Australia actually had relatively low numbers of applicants, due to, as the report states, "the longstanding Keystart and HomeStart low deposit home loan initiatives currently active in Western Australia and South Australia respectively". 

            Distribution of guarantees under the Scheme compared with population

            FHLDS2

            By area, demand for the Scheme was highest in the Toowoomba area, in regional Queensland, with 70 loans guaranteed in that area.

            Demand was also strong across South Western Sydney (Campbelltown area) and the outer suburbs of Melbourne (Craigieburn and Frankston).

            More than half of all purchases under the Scheme in capital city areas were between 15 kilometres and 30 kilometres from the nearest CBD, while almost a third of all single applicants purchased within 15 kms of the nearest CBD. 

            Distance between purchased property and nearest capital city CBD

            FHLDS3

            Almost 70% of all buyers using the scheme bought a house, while 25% bought an apartment and 5% purchased a townhouse. 

            Four out of five apartment purchases under the Scheme were in major cities, while house purchases were more evenly spread across major cities and regional areas.


            Disclaimers

            The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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            William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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